MS Life, Health, & Accident28
Adverse Selection: - ANSWERStendency for higher risk individuals to get and keep insurance
more than individuals who represent an average level of risk
Ron owns a $100,000 whole life policy. At age 47, Ron decides to cancel his policy and exercise
the extended term option with the policy's cash value. He will receive a term policy with a face
value of:
A. $25,000
B. $100,000
C. $50,000
D. The face amount cannot be determined from information given - ANSWERSD. The face
amount cannot be determined from info given.
Premiums for which of the following policies are deductible by an individual for income tax
purposes
A. Universal life policy
B. Whole life policy
C. Term policy
D. None of the above - ANSWERSNone of the above
Elaine owns a $100,000 whole life policy
with an additional $100,000 accidental death rider attached to it. While driving to work Elaine
suffers a massive heart attack and dies instantly. Her auto then runs off the road and crashes
down an embankment. How much will her policy pay to the beneficiary
A. $0
B. $100,000
,C. $150,000
D. $200,000 - ANSWERS$100,000. She did not die from the accident; she died from heart attack.
With regards to insurance, the term
consideration refers to the
A. Price of the contract (premium)
B. Insurer's method of evaluating the applicant for coverage
C. Screening process all agents undergo before licensing
D. Side-by-side policy comparison by the applicant - ANSWERSPrice of the contract (premium)
If an insured misstates his age on a life insurance application and dies while the policy is in
effect and before the discrepancy has been discovered
A. The policy is invalid in all cases
B. The policy is voidable only if the age was understated
C. The premium will be adjusted to reflect the correct age
D. The amount payable under the policy will be adjusted to what the premium would have
purchased at the correct age - ANSWERSD. The amount payable under the policy will be
adjusted to what the premium would have purchased at the correct age
The law of large numbers states that
A. The smaller the number of risks combined into one group, the less uncertainty there will be
as to the amount of loss that will be incurred
B. The larger the number of risks combined into one group, the less uncertainty there will be as
to the amount of loss that will be incurred
C. The smaller the number of risks combined into one group, the larger the loss will be to any
one individual in that group
D. The larger the number of risks combined into one group, the smaller the loss will be to any
one individual in that group - ANSWERSB. The larger the number of risks combined into one
group, the less uncertainty there will be as to the amount of loss that will be incurred
, Life insurance cash values are typically found in
A. Decreasing term contracts
B. Increasing term contracts
C. Group insurance contracts
D. Whole life contracts - ANSWERSWhole life contracts
Which policy provides life insurance protection for the insured until age 100
A. Whole life contracts
B. Annuity contracts
C. Group contracts
D. Term contracts - ANSWERSWhole life contracts
Which of the following forms of life insurance would be most appropriate for covering an
outstanding mortgage indebtedness
A. Increasing term
B. Modified term
C. Decreasing term
D. Endowment - ANSWERSDecreasing term
Which of the following statements
regarding a variable annuity is correct
A. It guarantees a continually increasing retirement income
B. It provides retirement income that fluctuates with the market value of equity investments
C. It provides retirement income based on fixed dollar amounts
Adverse Selection: - ANSWERStendency for higher risk individuals to get and keep insurance
more than individuals who represent an average level of risk
Ron owns a $100,000 whole life policy. At age 47, Ron decides to cancel his policy and exercise
the extended term option with the policy's cash value. He will receive a term policy with a face
value of:
A. $25,000
B. $100,000
C. $50,000
D. The face amount cannot be determined from information given - ANSWERSD. The face
amount cannot be determined from info given.
Premiums for which of the following policies are deductible by an individual for income tax
purposes
A. Universal life policy
B. Whole life policy
C. Term policy
D. None of the above - ANSWERSNone of the above
Elaine owns a $100,000 whole life policy
with an additional $100,000 accidental death rider attached to it. While driving to work Elaine
suffers a massive heart attack and dies instantly. Her auto then runs off the road and crashes
down an embankment. How much will her policy pay to the beneficiary
A. $0
B. $100,000
,C. $150,000
D. $200,000 - ANSWERS$100,000. She did not die from the accident; she died from heart attack.
With regards to insurance, the term
consideration refers to the
A. Price of the contract (premium)
B. Insurer's method of evaluating the applicant for coverage
C. Screening process all agents undergo before licensing
D. Side-by-side policy comparison by the applicant - ANSWERSPrice of the contract (premium)
If an insured misstates his age on a life insurance application and dies while the policy is in
effect and before the discrepancy has been discovered
A. The policy is invalid in all cases
B. The policy is voidable only if the age was understated
C. The premium will be adjusted to reflect the correct age
D. The amount payable under the policy will be adjusted to what the premium would have
purchased at the correct age - ANSWERSD. The amount payable under the policy will be
adjusted to what the premium would have purchased at the correct age
The law of large numbers states that
A. The smaller the number of risks combined into one group, the less uncertainty there will be
as to the amount of loss that will be incurred
B. The larger the number of risks combined into one group, the less uncertainty there will be as
to the amount of loss that will be incurred
C. The smaller the number of risks combined into one group, the larger the loss will be to any
one individual in that group
D. The larger the number of risks combined into one group, the smaller the loss will be to any
one individual in that group - ANSWERSB. The larger the number of risks combined into one
group, the less uncertainty there will be as to the amount of loss that will be incurred
, Life insurance cash values are typically found in
A. Decreasing term contracts
B. Increasing term contracts
C. Group insurance contracts
D. Whole life contracts - ANSWERSWhole life contracts
Which policy provides life insurance protection for the insured until age 100
A. Whole life contracts
B. Annuity contracts
C. Group contracts
D. Term contracts - ANSWERSWhole life contracts
Which of the following forms of life insurance would be most appropriate for covering an
outstanding mortgage indebtedness
A. Increasing term
B. Modified term
C. Decreasing term
D. Endowment - ANSWERSDecreasing term
Which of the following statements
regarding a variable annuity is correct
A. It guarantees a continually increasing retirement income
B. It provides retirement income that fluctuates with the market value of equity investments
C. It provides retirement income based on fixed dollar amounts
